If you’ve ever taken out a VA loan to buy a house, you are already aware of their many advantages, including their cheap interest rates, lack of mortgage insurance, and—perhaps most significantly—the lack of a down payment. Even property tax exemptions are frequently provided by local and state governments to qualified veterans.
You might be wondering if you can get a VA loan again if you’re intending to buy a new home soon and you’ve already utilized one for a previous home purchase. Does the number of times you can use a VA loan have a cap?
How Often is it Possible to Obtain a VA Loan?
The VA loan benefit is available to eligible veterans, active-duty military members, and surviving spouses for as many times as they’d want throughout their lifetime. There is no cap on the number of these mortgages you can obtain throughout your lifetime, provided you remain qualified for a VA loan and can secure financing from a lender.
In some cases, it is even feasible to have more than one VA loan open at once.
Veterans of the armed forces and, in some situations, their surviving spouses are eligible for VA home loans if they have served our country in the armed forces. One of the main advantages of VA loans, which come in a variety of forms, is that there is no down payment required when buying a property. Because the down payment is frequently the biggest barrier to homeownership for borrowers, particularly first-time home buyers, VA loans can greatly increase accessibility to homeownership for those who qualify.
The Department of Veterans Affairs (VA) is responsible for backing these loans. These loans aren’t really made by the VA; instead, it insures mortgages that are offered by lenders. As a result, VA loans frequently have more favorable terms than other loan types, such as conventional loans or FHA loans, because the risk to the lender is reduced.
Depending on when and how long you served, there are several VA loan eligibility requirements. Visit VA.gov to learn more.
One drawback of receiving a mortgage with no down payment is that you’ll have to pay the VA funding fee when you apply for one of these loans. This one-time charge contributes to the cost of the VA loan program.
Veterans are excused from paying the VA funding fee if they have a disability that has been approved by the VA. If you are a surviving spouse who lost your spouse while serving in the military or as a result of an accident sustained while serving, you are also exempt from paying the financing fee. The last exception pertains to soldiers who receive a Purple Heart and then go back to active duty.
A fee equal to 2.15% of the loan amount will be charged to first-time VA borrowers who put less than 5% down. The rate for subsequent borrowers with the same down payment is somewhat higher: 3.3%. Your finance charge will be less if you make a higher down payment. This cost might be covered by the loan or paid at closing.
How Many VA Loans are Permissible?
Only primary residences are eligible for VA loans, and these loans have occupancy criteria to verify that this is how the loan would be used.
Having said that, it is feasible to have two VA loans open simultaneously for two different principal residences. This can occasionally happen when a service member receives orders for a permanent change of station (PCS), requiring them to transfer to a new duty station.
Example Of When You Would Have Multiple Loans at Once
Let’s imagine that Gia has been given PCS orders and must now relocate her family and herself across the county.
She has a VA loan on her existing house and intends to use one to purchase a second house. Gia has a difficult time selling her house as she prepares to move. She might simply not want to sell her house and would rather keep it and rent it out.
Given the circumstances, she would be able to obtain a VA loan for her new primary dwelling while keeping her current home, provided that her credit and financial status allowed her to do so. If she has a rental income from that property, she might be able to utilize it to reduce the mortgage on her present house while applying for a new, second VA loan.
Nevertheless, based on how much of her entitlement is still available, Gia might be restricted in how much she can borrow without having to put down a deposit on that second VA loan.
What Is An Entitlement To A VA Loan?
Your VA loan entitlement is the percentage of your loan that the VA will guarantee, or, to put it another way, the amount that the VA will pay your lender in the event that you are unable to make payments on the loan.
Only loans up to a particular amount are guaranteed by the VA. You are entitled to this amount.
Complete Access
You will have what is referred to as “full entitlement” if you have never had a VA loan before or if you previously used a VA loan to buy a property but had your entitlement fully restored (typically as a result of selling the home and paying off the mortgage).
The VA will guarantee up to $36,000 of loans that are less than $144,000. Occasionally, this is referred to as your fundamental entitlement. Naturally, it’s difficult to find houses at this price range in many parts of the nation, therefore the VA further guarantees up to 25% of the loan amount for loans that are more than $144,000. This sum could be referred to as tier 2 entitlement or bonus entitlement.
Lower Entitlement
Your entitlement amount is decreased if a portion of it is already secured by a VA loan that you are presently repaying or if you have a history of defaulting on VA loans. The amount you can withdraw without using your own funds is constrained by this.
It might be challenging to decide when to bring money down and how much of a down payment to make. That’s what we’re about to address. If you have any issues, we advise seeing a home loan expert because some of the math in this article is quite challenging.
If you paid off a prior VA loan but still own the home that the loan was used to buy, you can also have a smaller entitlement. In this situation, you may be able to request a one-time restoration of your entire entitlement.
Your entitlement amount, if you’re requesting a second VA loan with a decreased entitlement, will be determined by the maximum loan limit in your county (which, in most locations, will be $726,200 in 2023), less the entitlement you’ve previously utilized.
This means that, in most parts of the country, you’ll have a reduced entitlement up to $181,550 ($726,200 0.25 = $181.550), less the entitlement that is now encumbered by a loan. This is because the VA will guarantee up to 25% of the loan.
A down payment of 25% of the difference is required if the cost of the home you wish to purchase exceeds the amount that the VA will guarantee.
How to Obtain Another VA Loan
In rare situations, if your claim is lowered, you might be able to have your full entitlement back. You’ll be constrained by the quantity of entitlement you still have if this isn’t attainable.
Remember that when we say “limited,” we don’t imply that you can’t take out a loan greater than what your entitlement will cover; rather, it just means that you won’t be able to do so without paying a down payment. Because lenders normally demand that 25% of your loan amount be covered by your entitlement, a down payment, or a mix of the two, this is true.
One Loan At A Time: Recover All of Your Benefits
In order to regain your full entitlement, you will often also need to sell the home if you previously had a VA loan that you have already paid off.
However, the VA permits homeowners who have paid off their VA loan but still own the home they bought with the loan to restore full entitlement once. This can be used if your VA loan has been fully repaid and you now own your house outright or if you have refinanced your VA loan into another loan type, such as a conventional loan.
Application for entitlement restoration must be made through the VA. You may only employ this type of restoration once; thereafter, you must sell the property as per the usual procedure in order to have your entitlement reinstated.
Finding Your Reduced Entitlement Amount If You Have More Than One VA Loan at a Time
It is possible to have more than one VA loan open at once if you receive PCS orders and need to keep your current loan open while applying for a new one for a property in the new location.
Keep in mind that the amount of your entitlement that has already been used by your VA loan will determine how much more you can receive. Take your maximum entitlement (your county’s loan limit multiplied by 25%) and deduct the entitlement already applied to your existing loan to determine the amount of entitlement you still have available.
Then, multiply that figure by four to determine the most loan amount you are eligible for without putting down any money. You must put down 25% of any loan amount that is higher than this in order to qualify.
The Verdict: Use VA Loans as Much As You Want, But Know Your Rights
The most crucial lesson is that there is no cap on the number of VA loans you can take out in your lifetime, provided you are qualified and are able to do so with a lender.
The amount you can borrow without putting down a down payment may have some restrictions in a few specific situations. It’s possible that your entitlement will be lowered or that you will need to file for a one-time entitlement restoration if you intend to obtain another VA loan while your present one is still outstanding, or if you paid off a previous VA loan but kept the residence. Don’t worry, Rocket Mortgage will make sure you understand everything and are qualified for whatever you are, and they will explain it all to you. We’ll make sure you receive every cent of the VA loan you’ve earned as compensation for your service to the nation.
